Theories of IP William Fisher (version 2015.1.30) Personality Roots: Personhood theory of "real" property Human needs served by private property rights 1. Peace of Mind e.g., Fried 2. Privacy e.g., Waldron 3. Autonomy e.g., Lincoln 4. Self-realization as a social being e.g., Rose 5. Self-realization as an individual e.g., Hegel, Kant, Hughes, Merges 6. Security and leisure e.g., Waldron, Fitzhugh 7. Responsibility e.g., Green, Mill 8. Identity e.g., Radin 9. Citizenship e.g., Arendt, Classical Republicanism 10. Self-expression e.g., Green, Larson Personhood theory of IP Intellectual products are manifestations or extensions of the personalities of their creators the artist defines herself in and through her art artists consequently are entitled to considerable continuing control over their products because injuries to those products injures the creator's self, or because control over products is part of general project of creating and maintaining an identity Appreciation of creators' personhood interests provides support for "moral rights" right of attribution right of integrity right of disclosure right of withdrawal right against excessive criticism droit de suite Modern Modifications all persons must be enabled and encouraged to express themselves artistically recognize increasing dependence of creativity upon re-use of extant intellectual products Difficulties Should an artist who invests herself in a work of visual art be able to prevent imitations? no; the copy would be a product of the copyist's mind -- Hegel yes; Hughes May an author alienate her right to control the copying of her work? deciding when and how to speak is an inalienable aspect of one's personality -- Kant expressions of mental aptitudes are external to the author and therefore alienable -- Hegel Should a celebrity's persona be protected against commercial exploitation by others? yes; it's a repository of selfhood no; it owes as much to the media and the audience as to the celebrity -- Madow Possible Applications Cast doubt on IP terms that extend beyond (or are shorter than) the life of the author? Shiffrin Cast doubt on defensibility of work-for-hire doctrine and pre-employment invention assignment agreements? opportunities for "exit" Merges Need to protect artists more against their own folly or ignorance? Pro-artist interpretation of long-term licenses? Merges Expanded interpretation of fair use for transformative works? Does equality of opportunity require an adjustment of moral rights? preservation of right of attribution Dastar is backwards but diminished protection for right of integrity and right of withdrawal Heightened nonobviousness requirement in patent law? Justification for (qualified) trade secret doctrine? Paine Bibliography Culture Sources Philosophy Aristotle Politics Amartya Sen "Equality of What?" (1982) Quality of Life (1993) Development as Freedom (1999) Martha Nussbaum Women and Human Development (2000) Frontiers of Justice (2006) "Constitutions and Capabilities: 'Perception' Against Lofty Formalism," 121 Harv. L. Rev. 4 (2006) Political Theory Commonwealth men See Bailyn, Ideological Origins of the American Revolution (1967) Marx Economic and Philosophic Manuscripts of 1844 Alexis de Tocqueville Democracy in America (1835/1840) Hannah Arendt On Revolution (1963) Psychology Edward Deci & Richard Ryan The Empirical Exploration of Intrinsic Motivational Processes, in 13 Advances in Experimental Social Psychology 39 (Leonard Berkowitz ed., 1980) "Intrinsic Motivation and Self-Determination in Human Behavior" (1985) "A Motivational Approach to Self-Integration in Personality," 38 Persp. on Motivation 237 (1990) "Self-Determination Theory and the Facilitation of Intrinsic Motivation, Social Development, and Well-Being," 55 Am. Psychol. 68 (2000) "The 'What' and 'Why' of Goal Pursuits: Human Needs and the Self-Determination of Behavior," 11 Psychol. Inquiry 227 (2000) "Living Well: A Self-Determination Theory Perspective on Eudaimonia," 9 Journal of Happiness Studies 139-170 (2008) Martin Seligman "Positive Psychotherapy" (2006) Christopher Utman "Performance Effects of Motivational State" (1990) Barry Schwartz "Self-Determination: The Tyranny of Freedom" (2000) The Paradox of Choice (2004) Economics Richard Easterlin Bruno Frey Daniel Kahneman Alan Krueger Alois Stutzer Law Keith Aoki Bound by Law "Pastures of Peonage" (2012) Yochai Benkler The Wealth of Networks (2006), chapters 5, 10 Oren Bracha "Beyond Efficiency" (with Talha Syed, 2014) Julie Cohen Configuring the Networked Self (2012) William Fisher "Reconstructing Fair Use" (1988), pp. 1744-94 "Theories of Intellectual Property" (2001) Promises to Keep (2004), Chapter 1 "Global Justice in Health Care" (2006) "The Implications for Law of User Innovation" (2010) Infection (forthcoming), Part III Neil Netanel Copyright's Paradox (2008) Madhavi Sunder "IP3" (2006) From Goods to a Good Life (2012) Talha Syed "Global Justice in Health Care" (2006) "Beyond Efficiency" (with Oren Bracha, 2014) Foundations Human Nature There exists such a thing as human nature, which is mysterious and complex but nevertheless stable and discoverable People's nature causes them to flourish more under some conditions than others Social and political institutions should be organized to facilitate that flourishing Good Life Conditions necessary for the full realization of personhood (1) Life “Being able to live to the end of a human life of normal length; not dying prematurely, or before one’s life is so reduced as to be not worth living.” Nussbaum (2) Health “Being able to have good health, including reproductive health; to be adequately nourished; to have adequate shelter.” Nussbaum (3) Autonomy George Kateb "One's dignity resides in being, to some important degree, a person of one's own creating, making, choosing, rather than being merely a creature or a socially manufactured, conditioned,manipulated, thing: half-animal and half mechanical and therefore wholly socialized." J.S. Mill "The human faculties of perception, judgment, discriminative feeling, mental activity, and even moral preference, are exercised only in making a choice. He who does anything because it is the custom, makes no choice. He gains no practice either in discerning or in desiring what is best. The mental and moral, like the muscular powers, are improved only by being used." John Rawls Ronald Dworkin Yochai Benkler The Wealth of Networks Nuances Key variable is subjective feeling of self-determination, not objective number of options Self-determination of this sort is adaptive correlated with better problem solving, job performance, and education (4) Engagement participation in shaping an important dimension of one's environment (a) meaningful work Marx "Meaningful work requires skill and concentration, presents the laborer with challenges and problems he can overcome only through the exercise of initiative and creativity, and is part of a larger project he considers socially valuable and must take into account in making his decisions" behavioral economics above a modest level, happiness is not significantly correlated with income or wealth sudden change (positive or negative) produces a temporary shift in happiness, but it soon dissipates relative income (with reference to peer group) is correlated with happiness, but not absolute income Easterlin 1999 Clark & Oswald 1996 Ferrer-i-Carbonell 2005 by contrast, happiness is strongly (inversely) correlated with unemployment lending support to contention that flourishing is correlated with meaningful work history Safety net in Argentina 2001 economic crisis see Tcherneva 2012 First governmental response Plan Jefes guarantee of public employment for heads of households unexpectedly, most of the participants proved to be female heads of households public opposition grew, because the program appeared to be compelling women with children to be entering the workforce Second governmental response Plan Familias income support policy for poor women only Women beneficiaries overwhelmingly lamented the change preferred public employment to cash payment that equalled their salaries many volunteered to continue working at old jobs without pay why? (b) civic engagement classical republican tradition celebrated "civic virtue" active participation in politics altruistic, deliberative, genuinely committed to the welfare of the polity as a whole, not to the advancement of self-interest or factional interest Tocqueville Frank Michelman Cass Sunstein (c) semiotic engagement John Fiske Michael Madow Jack Balkin (5) Self-expression Projecting oneself into or onto the world is key to personhood art (broadly defined) incorporate contemporary version of personhood theory of IP Kant, Hegel, Green, Radin, Lessig (6) Competence We feel better, and we do better, when we have the sense that we are capable of performing the tasks we address. psychology Deci & Ryan Seligman economics amount of time spent in school is positively correlated with overall life satisfaction even when schooling is compulsory, not chosen Oreopoulos 2003 although it's unclear whether education is directly or indirectly connected to happiness Helliwell 2004 (7) Connection Helliwell, J. F., Putnam, R. D. (2005). "The social context of well-being," Philosophical Transactions of the Royal Society of London "Our new evidence confirms that social capital is strongly linked to subjective well-being through many independent channels and in several different forms. Marriage and family, ties to  friends and neighbours, workplace ties, civic engagement (both individually and collectively), trustworthiness and trust: all appear independently and robustly related to happiness and life satisfaction, both directly and through their impact on health." philosophy: "affiliation" Nussbaum psychology: "relatedness" Deci & Ryan political theory: communitarianism economics: persistent correlation of "sociability" with happiness Helliwell, J. F., Putnam, R. D. (2005). The social context of well-being. Philosophical Transactions of the Royal Society of London "Our new evidence confirms that social capital is strongly linked to subjective well-being through many independent channels and in several different forms. Marriage and family, ties to  friends and neighbours, workplace ties, civic engagement (both individually and collectively), trustworthiness and trust: all appear independently and robustly related to happiness and life satisfaction, both directly and through their impact on health." Examples extraversion friendship networks bonds with children Franz v. United States (DCCir 1983), paragraph 40 sexuality carpooling neutralizes unpleasantness of commuting exceptions teenagers marriage general life-satisfaction measures are strongly correlated with marriage -- and inversely correlated with divorce Stutzer & Frey (2006) Becchetti et al. (2008) but life satisfaction associated with marriage arguably exhibits adaptation (8) Privacy zone for experimentation and intimacy Waldron Distributive Justice Currently, access to these conditions is both limited and systematically unequal Our ambition should be to expand and (to some degree) equalize access Variants of egalitarian criteria "universal basic capabilities" Nussbaum/Sen "sufficientism" Harry Frankfurt "democratic equality" Elizabeth Anderson Reinforced by behavioral economics absence of correlation of happiness or life satisfaction above a moderate level of income or wealth argues for redistribution of wealth and opportunity Culture Diversity The more multifarious the life-styles and ideas on public display in a society, the more each of its members must decide for herself what to think and how to act, thereby developing her own "mental and moral faculties" and rendering the culture as a whole even more "rich, diversified, and animating." Mill Art The more complex and "resonant" the "shared language" of a culture -- the richer it is in the raw materials of representation, metaphor, and allusion -- the more opportunities for creativity and subtlety in communication and thought it affords the members of the culture. Dworkin Education universally available empowering Democracy political Netanel semiotic John Fiske, Michael Madow, Jack Balkin Implications Copyright Reform (1) Education we should modify aspects of copyright law that impede educational activities e.g., more generous exceptions for distance learning for educators, exceptions to rights of distribution and public performance for students, exceptions to right of reproduction e.g., create exceptions to anti-circumvention rules for teaching, studying, scholarship e.g., differential pricing in the context of software is good (2) The Idea/Fact/Expression Distinction no protection for things essential to deliberation and civic engagement e.g., use by GBH of excerpts of speeches by Martin Luther King (3) Fair Use adjust incentive/loss ratios associated with potential entitlements to reflect impact on: (a) culture (b) opportunities for access to the good life increase opportunities for commentary and criticism e.g., parody increase opportunities for creative reuse of copyrighted works construe "transformative" as "creative" decrease privileges for consumptive uses most broadly, construe the 4 statutory factors in section 107 in light of the normative beacon of the good life and good society (4) Moral rights weaker protections for right of integrity strengthened rights of attribution e.g., British rules on fair dealing e.g., reconsider Dastar (5) Libraries no public lending rights, at least if patrons would bear cost if lending rights are merely a mechanism to shift costs to governments, not so bad opt-out rule for digital libraries e.g., Google Print Library Project Bracha 2007 (6) Formalities appropriate preconditions for copyright protection registration systems to facilitate location of owners (qualified) privileges for nonpermissive use of "orphan works" cf. treatment of restored copyrights (7) Compulsory Licensing increased reliance on liability rules, rather than property rules, particularly with respect to violations of 17 USC 106(2) reduce impediments to free flow of information increase diversity of works available to the public cf. 17 USC 115 lower rates for socially beneficial activities e.g., PBS (8) Differential Pricing Opportunities may increase incentives for innovation, while reducing social costs depends on the shape of the demand curves equalize access to entertainment and informational products e.g., Kirtsaeng (2013) e.g., region coding of DVDs and Blu-ray discs Risks PD is bad if it increases the “granularity” of social life Gordon PD is bad if it corrodes the spirit of altruistic sharing Benkler; von Hippel PD is bad if it fosters invasions of privacy possibly manage through restrictions on gathering and using data (9) Supplementary Government Funding see, e.g., European cinema, discussed in Welfare Theory (10) Alternative Compensation System for Recorded Entertainment see Welfare Theory among other benefits, increase consumers' access to diverse arrays of recordings traditional outlets (e.g., radio) are becoming less diverse Hannah Karp, WSJ, 16/01/2014 (11) Traditional Knowledge conflicting aspirations: In favor of more legal protection Community TCEs are one way a community defines and sustains itself Diversity resist global cultural homogenization Distributive Justice temper inequality of wealth and resources In favor of less legal protection Semiotic Democracy encourage creative refashioning of culture Autonomy increase cultural choices; freedom to select among them Trademark Reform (1) Increase opportunities for creative use of trademarks expanded opportunities for trademark parody expressive genericity Rochelle Dreyfuss (2) Tighter restrictions on advertising particularly those that capitalize on and reinforce the sources of distortion to which consumers are already subject Patent Reform Developing Drugs for Developing Countries modify patent law and other incentive systems to increase the development and distribution of drugs that prevent or address contagious diseases in developing countries Concerns (1) Paternalism Sources Feinberg, "Legal Paternalism," 1 Ca. J. Phil. 105 (1971) Gerald Dworkin, "Paternalism," in Morality and the Law (1971) J. Kleinig, Paternalism (1984) Mitigated by demonstration that people exhibit "bounded rationality" when seeking to maximize utility Sources Kahneman, Kruger, Schkade, Schwartz & Stone, "The Day Reconstrution Method" (2004) Kahneman & Krueger 2006 Becchetti et al. (2008) we engage too much in activities that do not bring us happiness or satisfaction spend money on large houses far from work, which necessitate commuting and to which we adapt quickly we engage too little in activities that do bring us happiness or satisfaction socializing education The non-coercive character of the proposed reforms cf. Thaler & Sunstein, Nudge (2009) (2) Hazards of Government Bureaucracy Rent-seeking Corruption Partial Response Alter the types of organization to which we confer this power capitalize on the deterioration of the public/private distinction institutions that have increasing control over our lives employers suppliers of information services e.g., Google and Facebook with respect to privacy Welfare Incentive Theory Roots Utilitarianism Jeremy Bentham, Introduction to the Principles of Morals and Legislation (1789) J.S. Mill, Principles of Political Economy (1848) Criterion: "greatest happiness of the greatest number" prospective collective Economic Analysis of Law an approach to legal scholarship that became increasingly influential starting in 1980 for explication of the approach and an associated bibliography, see the map on Economic Analysis Public-Goods "Problem" Conditions that define a public good Nonrivalrous Nonexcludable Examples of public goods navigational aids national defense roads inventions reproducible art The problem: underproduction Original creator will not be able to recover costs of creation Anticipating this effect, creation will not occur in the first instance Mill (1848) Pigou (1924) Arrow (1962) Circumstances that exacerbate the problem a. High costs of creation b. High uncertainty Risk aversion may discourage potential innovators for detailed assessment of this variable, see Horowitz (2012) c. Low marginal cost of production d. Ease of reverse engineering e. Positive externalities from the public good "infrastructure" or "generativity" functions Jonathan Zittrain, The Future of the Internet (2008) Brett Frischmann, Infrastructure (2012) Circumstances that mitigate the problem a. Lead time protects first mover e.g., trade books Breyer (1970) Breyer in retrospect (2011) e.g., fashion? this was once true; less so now e.g., football b. Custom or extralegal norms protect first mover e.g., trade books Breyer (1970) comedy? Oliar & Sprigman c. Opportunities for increasing excludability through self-help Secrecy e.g., soft drinks; chocolate; software Encryption Contracts e.g., Databases e.g., Lexis/Westlaw d. Alternative motivations for production Passion Prestige/fame Tenure Norms of science Rai (1999) Golden (2001) Advertising Harlan/McKenna in Bleistein sound recordings may serve as ads for performances Collaborative voluntary creation Benkler, "Coase's Penguin" (2002) Benkler, "Sharing Nicely" (2004) e. Philanthropy traditional source of funding for music Scherer Public radio in USA Possible Solutions Solution #1: Government Provides the Good Examples Space Research NASA Agricultural Research Department of Agriculture Medical Research National Institutes of Health National Defense Navigational Aids Compare Coase (1974) with Van Zandt (1973) and Shavell (1996) Advantages Minimizes deadweight loss through income-tax funding [see discussion of Prizes] No rent dissipation at primary or secondary level, because government coordinates innovation at both levels Flexibility in responding to changes in research agenda Disadvantages Errors by government officials in determining which projects are (most) socially valuable Low salaries and bureaucracy make government a poor venue for innovative activity Incompatibility of bureaucratic culture and artistic culture Solution #2: Government Selects and Subsidizes Private Innovators Examples National Institutes of Health (NIH) National Endowment for the Arts European cinema In most countries in Europe, government agencies contribute funding for film productions most of the monies are distributed by national agencies modest amounts distributed by regional agencies sources of the funds general tax revenues tax on television stations or television advertising especially important in France tax on box-office receipts pattern of distribution offset biases of the private market favor SMEs, unconventional projects, first and second films military procurement contracts Variation: Auction off the right to provide a particular innovation Advantages Avoids rent dissipation, by targeting resources to one or a few firms Avoids inefficiency of multiple firms making redundant assessments of the social value of particular research projects Minimizes deadweight loss through income-tax funding Gallini/Scotchmer (2002) [see discussion of Prizes] Disadvantages Errors by government officials in determining which projects are (most) socially valuable Errors by government officials in identifying best innovators e.g., debacle in malaria research e.g., controversy concerning the quality of French and Portuguese cinema Poor motivator of innovative activity once the grant recipient has been selected Gallini/Scotchmer (2002) Solution #3: Government Issues Prizes to Successful Private Producers Proponents Madison see Waltersheid (1994) Macfie (1863; 1875) Polanvyi (1944) Kremer (1998; 2000) Calandrillo (1998) Shavell & Ypersele (2001) Netanel (2003) Fisher (2004) Existing Examples USSR PRC Huang (2003) Atomic Energy Reisenfeld (1958) Audio Home Recording Act (1992) All Digital Audio Recording Devices (DARDs) must contain SCMS Compulsory Royalty on DARDs (2% of wholesale) and Media (3% of wholesale) 1/3 to Musical Works Fund 2/3 to Sound Recordings Fund Safe harbor for sale of DARDs and noncommercial use of DARDs see Fisher (2004), chpt. 3 Proposed Examples Mandatory In patent context see Shavell/Ypersele (2001) Awarded to all inventors who meet creativity requirements and who apply Inventors have no right to exclude competitors and thus no monopoly power Financial incentives derive from revenues distributed ex post by government on basis of sales data and surveys Objective: pay inventors the full “social surplus” of the invention requires including in the prizes estimates of the social value of follow-on innovations Revenue raised from income taxation Limited duration? In copyright context see Netanel (2003) see Fisher (2004), chpt. 6 Optional Authors and artists are permitted to choose between copyright system and reward system Inventors are permitted to choose between patent system and reward system NASA plan to mimic privately funded $10M X-Prize Patent Purchase Program Government offers to purchase patents Possible techniques for determining offer prices: fair market value on date of purchase Patent Buy-out system: Government holds auctions on patented inventions, then offers to buy out (most) patentees at the highest plus a markup (to reflect gap between private and social value) Kremer (1998) Which patents? all? patents in industries characterized by cumulative innovation or patent thickets? patents in industries the government wishes to promote? patents in industries where social costs of monopoly pricing are especially high? e.g., life-saving drugs Patent Expropriation Program 28 USC 1498(a) "Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture." Theory Dominant Theory: Form of Eminent Domain; 5th amendment thus requires "just compensation" in effect, "inverse condemnation" Subordinate Theory: Prospective Implied Easement (since 1910); statutory interpretation requires "just compensation" cf. Bayh-Dole Act reserves to federal government a nonexclusive, nontransferrable right to practice the patent arising out of federally funded research anywhere in the world Practice No injunctive relief No recovery for contributory infringement or inducement a few older (pre-1940) cases awarded lost profits modern cases create strong presumption that only remedy is reasonable royalty for criticism, see Cahoy (2002) Additional statutory authority might be necessary to empower the federal government to authorize third parties to make and sell embodiments of patents An Alternative Compensation System for Recorded Media Principles 1. Money should be collected from businesses that capitalize upon consumers' demand for digital movies, but currently pay no fees Internet Service Providers Manufacturers of consumer electronic equipment computers smartphones tablets Media-related software applications 2. The funds collected in this manner should then be distributed to creators The formula used to determine shares would vary by country USA strong commitment to principle of consumer sovereignty suspicion of governmental involvement in the arts points toward criterion: funds distributed in proportion to popularity i.e., copyright owners receive shares proportional to the frequency with which their works are watched or listened to Europe multiple criteria would likely be combined in different proportions relative popularity voting cultural fund see Philippe Aigrain 3. Thereafter, online distribution of movies and recorded music should be legalized Variants 1. Governmental Funds collected through levies on ISPs, manufacturers of media-related consumer electronic products, etc. Funds distributed by national government agency modification and enlargement of the public funding mechanisms already in place in Europe 2. Private Alter rules of secondary copyright liability to put pressure on ISPs, manufacturers to participate in the construction of a nongovernmental system immunize them from antitrust liability for negotiating such a system collectively Funds collected and distributed by the resultant nonprofit organization Mechanics (USA version) 1. Registration Copyright owner registers unencrypted recording with Copyright Office Owner provides data concerning duration and incorporated works Copyright Office supplies creator with copy containing unique digital signature Small registration fee Opposition procedure 2. Size of the fund Possible Criteria 1. Provide creators social surplus Distort larger system of incentives Expensive & politically unpalatable Psychic benefits of creativity mean that full social value is not necessary to sustain creativity at current levels 2. Fairness 3. Make creators whole 4. Preserve Flourishing Entertainment Culture 3. Taxation Income Tax Advantages Low administrative costs Limited distortionary effects If incidence of the tax matches incidence of benefits Consumption of entertainment products roughly correlated with income But cf. Pew data Income tax is mildly progressive Disadvantages Politically unpopular Any increase in the income tax is unpopular Fear, especially in developing countries, that the money would be diverted to other programs "My tax dollars are paying for smut, misogyny, etc.?" "I don't listen to music or watch movies. Why should I have to pay for them?" Tax burden 2004 data 87 million households pay taxes Each American household currently spends aprx. $470 per year on recorded entertainment Plus aprx. 200 hours per person per year watching or listening to advertisements Annual tax during first year of operation: average of $27 per household Annual tax if the system fully displaces existing business models (using "worst-case" assumptions): average of $254 per household Tax on Devices and Services Advantage More politically acceptable More "voluntary" Largely limited to consumers of digital entertainment Disadvantage Greater cross subsidies and associated distortions Tax rate: 11.8% in 2004 Most visible form: tax on broadband access of $5.36 per month ($64.33 per year) Tax rate if the system fully displaces existing business models (using "worst-case" assumptions): $16.84 per household per month ($202 per year) in taxes on Internet access and all devices and services Variations Higher rates on devices than on ISP access? Ramsey pricing? Original problem: What pricing scheme by a multiproduct monopolist would maximize social welfare subject to a profit constraint? Answer: markup on MC of each product should be inversely proportional to price elasticity of demand for that product Adapted: tax rates on devices and services should be inversely proportional to elasticity of demand for each Danger: may have perverse distributional effects E.g., high tax rates on things consumers see as necessities (broadband access) E.g., low taxes on things consumers see as dispensable (DVRs?) 4. Measuring Value Goal: Estimate relative total value of each entertainment product to consumers Provide appropriate signals to creators Fairness: equity theory of distributive justice Minimize hazards of governmental determination of merits of works How? Count Consumption Consumers will gravitate toward what they like, what gives them pleasure Loosely resembles a market system In effect, "paying" for the entertainment with their time Cost to them is opportunity cost Streaming Noninteractive webcasters report playlists and numbers of subscribers Interactive webcasters report number of streams DVD Burning Sales data on DVDs Surveys to determine frequency of copying Downloading Sources of Distortion 1. Consumers download media but then watch only portions AT&T data for music 2. Differences in frequency of playback less serious than with music 3. Ballot-Stuffing Possible Solutions Usage Sampling Large numbers of sampled households, selected at random Software Responsibility of Copyright Office: certify software systems Most plausible mechanism: SourceForge Distribution Mechanism: Plug-in for P2P, streaming, and CD/DVD copying programs Automatic reporting, by registration numbers, of all songs and films played from beginning to end Aggregation of data Privacy assurances Limit: Only count consumptions using devices connected to -- or capable of reporting to -- the Internet Percentage of such devices will steadily expand Measure Duration Longer works are worth more to consumers than shorter ones Reflected in the fact that they pay more of their time; larger opportunity cost Present system takes such considerations into account roughly Short films Will reliance on this factor prompt creators to lengthen works? Opposing factors: Cost of producing longer version Consumers resent poorly edited, overly drawn our works Voting (Blur/Banff/Eckersley) Benefits: measure intensity of enjoyment Hazards Difficulties of inducing people to vote Risk of ballot-stuffing Reinforce cult of appearance Diversion to political causes (Volohk) Distortion of signals to creators External estimates of relative value So long as one can make reference to a parallel or recent market system, can use consumer spending patterns as a guide E.g., aggregate value of music vs. film Fact that classical recordings are commonly slightly more expensive than other genres Universal's recent price reductions European prices Relative spending on types of performances Opera, jazz, rock Risks of pursuing this approach Heighten danger of governmental discretion Line-drawing Only possible to do on the basis of categories of works, not individual recordings Determining the appropriate boxes and then arguing over proper classification of individual recordings would be costly Forfeit one of the advantages of consumption-based system: avoid overvaluing preferences of the wealthy 5. Payment Money initially allocated among categories in proportion to estimated injuries Reallocation in response to changing injuries, costs, and entertainment culture Payments to individual copyright owners Baseline: one consumption, one payment Adjusted for duration Rough proxy for value to consumers Treatment of Derivate Works Option #1: Revenue stream divided among contributors Option #2: no effort to separate and compensate for contributions to composite works give creators choice over ND or D 6. Reform Copyright Law Permit: Reproduction of a musical composition, sound recording, or motion picture for noncommercial purposes (i.e., consumption, not resale) Preparation of a derivative work of a sound recording or motion picture registered pursuant to the new scheme, provided that the derivative work is also so registered in a timely fashion Distribution of a sound recording (including a musical composition embodied therein) or motion picture via the Internet Public performance of a sound recording (including a musical composition embodied therein) via a digital audio transmission Public performance of a motion picture via a digital video transmission Digital Rights Management? 1. Could one register a recording subject to partial copy protection? No, in the interest of semiotic democracy 2. Could one register an unencrypted version of a recording but also distribute to the public encrypted versions of the same recording? Yes, in part to reduce resistance to adoption of the scheme and to increase usage of it 3. Create an exception to DMCA 1201 for audio and video recordings? No, let the system prove its merits in competition with the self-help strategy Advantages For consumers Large cost savings they would pay less under this system than under the current combination of business models Unlimited access to recorded media The set of cultural products available to them would be larger and more diverse reason: the diminished power of intermediaries would enable a larger and more diverse set of artists to reach consumers directly and thus earn sufficient revenue to cover costs Increased opportunities for creative reuse of cultural products semiotic democracy For creators Opportunities to distribute works directly to consumers reduced dependence on major intermediaries Increased income For suppliers of devices and services Increased taxes offset by increased demand For public Decreased litigation Decreased law-breaking avoid prolonged, culturally corrosive "war on piracy" closely analogous to the current "war on drugs" Disadvantages Cross-subsidies Result: distortions in consumer behavior, deadweight losses, and unfairness Vary substantially with the method of taxation Mitigate with Ramsey pricing (Benkler) Moral rights concerns: Classic moral rights Rights of Integrity Rights of Attribution Increased opportunities for creative reuse of digital copies threaten both Possible responses: a. Give artists the option to retain or relinquish rights of integrity perhaps use financial incentives to increase their willingness to give up these rights higher payout rate b. Recognize that, with respect to cultural products distributed in multiple copies, rights of integrity are obsolete by contrast, rights of attribution should enjoy increased protection cf. Tushnet Discretionary Governmental Power Potential for inefficiency or corruption cf. some collecting societies Risk that officials would abuse their authority Rent-seeking lobbyists would seek to shape the distribution formula Leakage across national boundaries the more broadly this system were adopted, the less serious would be this concern Advantages Competition in the quest for the pot of gold fosters fast, focused research (same as Solution #5) Optional Reward System will maximize incentives for creativity Shavell & Ypersele (2001) Minimizes deadweight loss through income-tax funding Partially offset by another distortion: By decreasing the benefits of labor, each income tax increase will cause taxpayers to substitute leisure for work, causing economic losses Estimates of Magnitude Dominant view: $.30 - $.50 for every $1 raised in tax revenue Snow/Warren (1996) Dissenting view: More than $1 for every $1 raised in tax revenue Feldstein (1997) Adverse effect will not occur, however, if: (a) tax increase is used to finance production of a public good, and (b) incidence of the tax matches incidence of the benefits of the public good Kaplow (1996; 1998; 2004) Enables correction of misalignment between market value of innovations and social value pharmaceutical research Disadvantages Administrative Costs Gallini/Scotchmer (2002) suggest costs of estimating social value would be incurred for every invention Shavell/Ypersele (2001) point to periodic payments based on sales Rent dissipation wasteful duplicative innovation Imperfections in the systems for estimating the value of inventions in copyright context, ballot-stuffing Liebowitz (2003) Leakage across national boundaries especially severe in copyright context Fisher (2004), chpt. 6 Duplicative production and marketing? Solution #4: Legal Reinforcement of Self-help Strategies Examples Restrictions on Reverse Engineering Boat-hull protection laws Semiconductor Chip Protection Act of 1984 Trade Secret Law Anti-Circumvention Rules DMCA 1201 Technology Mandates CBDTPA (proposal) Consumer Broadband and Digital Television Promotion Act Forbid the sale or transportation in interstate commerce of any "digital media device" (defined broadly) that did not contain "standard security technologies" prescribed by the Federal Communications Commission. Standards formulated either by a consortium of "representatives of digital media device manufacturers, consumer groups, and copyright owners" or, if they fail, by the Commission itself Standards would prevent the machines in which they were embedded from reproducing and distributing copyrighted recordings - but would permit users to make "personal copies" of broadcast programming "for lawful use in the home" and would also "take into account the limitations on the exclusive rights of copyright owners, including the fair use doctrine." FCC Broadcast Flag Rules Advantages Legal Protections for Trade Secrets prevents wasteful private expenditures on secrecy Restrictions on Reverse Engineering may protect lead time and thus avoid need for other, more costly solutions Samuelson/Scotchmer (2002) Disadvantages secrecy deprives public of knowledge of the innovation, shields information that would be produced anyway, and impedes mobility of skilled labor Bone (1998) prohibition of reverse engineering fosters wasteful duplicative construction techniques and may frustrate interoperability Samuelson/Scotchmer (2002) rigidity of technology mandates inhibits innovation anti-circumvention rules and technology mandates have trouble accommodating public-regarding exceptions fair use experimental use Solution #5: Government protects producers against competition Examples Toll Roads in 19th century cf. Charles River Bridge case Intellectual Property Copyright Patent Advantages Relies upon the market to drive research toward areas of high social value undermined in some contexts by imperfect connection between "willingness and ability to pay" and social value e.g., bias in pharmaceutical research Relies upon private parties' knowledge of the costs of R&D, marketing, etc. Gallini/Scotchmer (2002) Imposes costs of innovation upon (initial) users of the innovations avoids the distortions associated with cross subsidies Competition in the quest for the pot of gold fosters fast, focused research Disadvantages Deadweight Loss under appropriate market conditions, may be mitigated by price discrimination see discussion of PrIce Discrimination in "Applications," below Viscusi (1995) Sykes (2002) may be mitigated by delay and uncertainty in patent enforcement Ayres/Klemperer (1999) Administrative and Litigation Costs Impediments to Cumulative Innovation mitigated by opportunities for licensing Green/Scotchmer (1995) Lemley (1997) Gallini/Scotchmer (2002) exacerbated by impediments to licensing imperfect registration systems Sprigman (2004) multiple parties/ multiple patents Heller/Eisenberg (1998) Mazzolleni/Nelson (1998) Patent Thickets disagreement concerning the seriousness of the problem serious Eisenberg, Rai not serious Kieff 2001; Adelman 2005; Lei et al 2009 may be mitigated by patent pools for complementary patents Bittlingmayer (1988) Gilbert/Shapiro (1997) Shapiro (2001) offsetting danger that pools may facilitate anticompetitive behavior, particularly with respect to substitute patents Kaplow (1984) Barton (1996) Carlson (1999) possible sorting mechanism: requirement of independent licensing option would corrode (bad) substitute pools, without adversely affecting (good) complementary pools Lerner/Tirole (2002) cf. Lerner/Tirole/Strojwas (2003) Rent dissipation wasteful duplicative research at primary level Grady/Alexander (1992) Denicolo (2000) wasteful duplicative research at secondary (improvements) level may be mitigated by increased patent breadth (facilitating coordination) compare Kitch (1977) note tension between reforms that might mitigate this type of inefficiency and reforms that might mitigate impediments to cumulative innovation (above) with Merges and Nelson (1990) wasteful efforts to "invent around" patents or copyrights Gallini (1992) mitigated by licensing Maurer/Scotchmer (1998) division of spoils through oligopoly, diminishing the share of profits that stimulate innovation Kaplow (1984) Ineffectiveness in digital environment Selected Applications IP = "Necessary Evil" IP protection should not extend to innovations that would be produced in optimal numbers without them possible examples copyright protection for advertisements copyright protection for scholarly articles copyright or design protection for innovations in fashion Examples of Copying Variety of Legal Regimes USA Minimal copyright, trademark, or design patent protection Europe EU 25 years of protection for registered designs; 3 years for unregistered France & Italy Strong protection for both registered and unregistered designs When should designers donate IP? patent protection for business methods patent protection for taxation mitigation strategies the right of publicity for celebrities Michael Madow (1993) Disaggregation presumptive argument for tailoring IP rights to particular kinds of innovations e.g., criticism of uniform duration of patents and copyrights better to adjust term to keep profits close to development costs Kaplow counterarguments increased administrative and litigation costs increased hazard of "industry capture" Mark Lemley & Dan Burk, "Policy Levers" (2003) Scope of Protection: Incentive/Loss Ratio Principle: when adjusting IP law, grant creators entitlements with high ratios and deny them entitlements with low ratios Kaplow, "Patent/Antitrust Intersection" (1984) Fisher, "Reconstructing Fair Use" (1988), Part IV e.g., right to prevent reproduction of excerpts in critical reviews small benefit to authors large social welfare losses Compulsory Licenses Bounded Rationality and IP "Monopolistic Competition" Yoo (2004) Abramowitz (2011) Justification for Novelty and Nonobviousness Requirements in Patent Law No need to incur social costs of patent in order to provide society the benefit of the invention Posner Criticism of Utility Requirement in Patent Law inventor may be in a better position than patent examiner to assess social value of an invention if the invention is truly lacking in social value, granting a patent will do no harm, because no one will seek access to it Shavell Duration long terms are bad, because the incentive effect of rights long into the future is weak retroactive extensions of terms make no sense Price Discrimination slides Optimal Levels of Protection patent slides copyright slides Source Identification Economic functions of trademarks 1. reduce consumer search costs 2. encourage businesses to invest in and maintain quality Economic hazards of trademarks confer market power on the owners of scarce or powerful marks as a result, cause an increase in prices and a reduction of consumer welfare Guideline: doctrines of trademark law should be shaped so as to reinforce economic functions, while mitigating hazards e.g., disfavor descriptive marks e.g., no protection for generic marks e.g., skepticism concerning doctrine of dilution Criticisms 1. cultural account of trademarks shows this theory of their functions to be simplistic 2. recognition of the preference shaping power of trademarks and advertising casts doubt on premise of the economic theory: exogenously determined preferences 3. other techniques or institutions might perform the economically beneficial roles of trademarks as well (or better) with fewer side effects Fairness Classic form: Locke Each person has a natural right to the fruits of his or her (intellectual) labor Root: Locke, Second Treatise, Chpt. 5 generative vignette labor upon land held in common provisos sufficiency spoilage largely mooted by tacit agreement to use of money as medium of exchange duty of charity obligation to let others share one's property in times of great need, so long as one's own survival is not impaired The state has an obligation to enforce those rights duty of the state to "determine," "settle," and respect natural property rights Presumptively strong application to IP public domain provides a plausible analogue to Locke's "commons" labor is ordinarily the largest input provisos offer ways to balance creators's rights with users' interests spoilage proviso seems irrelevant but sufficiency and charity provisos are suggestive Difficulties unclear whether Lockean theory properly applies to intellectual labor (Shiffrin) formal rationales: 1. necessary to effectuate right to means of subsistence 2. religious obligation to subdue the earth and cultivate it for benefit of life 3. intuitions regarding self-ownership 4. moral value of work 5. intuitions regarding proportionality 6. imagery of transformation wild to domestic raw to cultivated chaotic to ordered unproductive to productive relevance to IP: 1 & 2 seem irrelevant 4 & 5 seem relevant 3 & 6 seem unclear Ambiguity in the meanings of key concepts "labor" time and effort something you'd rather avoid Hughes something that creates social value Gordon; Hughes premium for creativity Becker proportionality Nozick Merges "the commons" facts language cultural heritage scientific knowledge ideas known and unowned known reachable possible the "provisos" sufficiency strong vs. weak versions Nozick, Gordon, Waldron removal of ideas from "the commons" Hughes, Shiffrin, Yen addiction to intellectual products Gordon Shiffrin spoilage Damstedt 2003 charity Gordon Merges Solutions? effort to derive answers from Locke is unpromising answers require reflection on meaning of "fairness" in contemporary environment Modified form: equity theory Each person deserves a share of the fruits of a collective project proportionate to the magnitude of his or her contribution to the venture the theory of distributive justice to which most people (Westerners?) subscribe Possible Implications copyright in poetry fair compensation of contributors to composite works? contracts + work-for-hire doctrine in copyright treatment of pre-employment patent assignment agreements rights for creators of "traditional knowledge" Merges, "Locke for the Masses" temper copyrights to reflect contributions of materials from the public domain? e.g., Disney animated versions of folk tales Shiffrin 2006 Chander & Sunder 2004 rights to factual works? maps databases histories autobiographies e.g., Hodgson (England 2011) "hot news" residue of misappropriation doctrine possible justification for prizes, liability rules, and compulsory licenses because desert arguably generates rights to compensation, not necessarily ownership Becker but see Merges temper right of publicity? luck contributions to celebrity status by the public "shop right" or independent-invention defense in patent law? Nozick's reading of Lockean proviso Meurer and Vermont defense and interpretation of utility requirement in patent law tied to different conceptions of labor potential justification for nonobviousness doctrine premium on creative labor sufficiency proviso (Nozick) Bibliography